Most factories jumped on contract-work bandwagon even before pandemic hit

Of the 198,628 organised factories surveyed, 98.4% of them employed contract workers in 2019-20, significantly up from around 71% in the previous year

Almost all factories in the organised sector began employing contract workers even before the pandemic, showing an increasing trend of contractualisation of the labour force in the country, according to the Annual Survey of Industries (ASI) data released by the Labour Bureau.

Of the 198,628 organised factories surveyed, 98.4 per cent of them employed contract workers in 2019-20, significantly up from around 71 per cent in the previous year.

In 2011, only 28.3 per cent of factories employed contract workers. The number of contract workers in the total workforce of the organised sector swelled to 5.02 million (38.4 per cent) in 2019-20, from 3.61 million (34.6 per cent) in 2011-12. 

Labour economist KR Shyam Sundar, visiting professor, Impact and Policy Research Institute, said the new labour codes allow contractualisation in not only peripheral, but core activities as well.

“Though not implemented, the labour codes have given a clear policy signal to the labour markets to create a flexible workforce, with minimum costs accruing to the industry,” he added.  

Out of the 22 major states and union territories, every factory that reported to the Labour Bureau in 2019-20 in Chandigarh and Uttarakhand employed contract workers, followed by Chhattisgarh (99.97 per cent), Tamil Nadu & Delhi (99.96 per cent), and Haryana (99.82 per cent).
 

The least number of factories employing contract workers were in Telangana (83 per cent). Between 2011 and 2020, the wage gap between a direct and a contract worker declined from 24.6 per cent to 15.6 per cent, with wide variations in the intervening period.

In 2019-20, the daily wage contract workers earned is the highest in Kerala (Rs 554), followed by Tamil Nadu (Rs 548), Chandigarh (Rs 546) and Odisha (Rs 526), whereas direct workers earned the most in Jharkhand (Rs 969), followed by Odisha (Rs 783) and Chandigarh (Rs 657).      

The share of factories paying workers with the social security benefits like provident fund and bonus have gone down in the decade between 2011 to 2020, as in 2019-20, only 67 per cent factories paid provident fund (PF) and only 55 per cent factories paid bonus, down from 73 per cent and 64 per cent respectively in 2010-11.

“The future workforce, primarily consisting of a contract-based informal workforce, which will be low in training and skilling will be a hugely flexible and a precarious workforce. The low trained, low skilled and low paid workforce will create a vicious cycle as it won't be able to invest in its upskilling and move towards higher income,” Shyam Sundar added.  

However, Lohit Bhatia, president, Indian Staffing Federation (ISF) says that companies often use contractual employees during peaks as seen in e-commerce, logistics, retail, manufacturing and industrial segments, as they provide immediate employment to millions of informal personnel who work in small and medium industries or other informal segments.

“Contractual employment aids faster job creation, transition from informal to formal employment, support for employment that provides skilling and social security coverage at entry level and experience to such employees at large corporations,” he added.